Cairo: Egypt's Islamist President Mohammad Mursi on Sunday ordered the surprise retirement of his powerful defence minister and scrapped a constitutional document which handed sweeping powers to the military.

Field Marshal Hussain Tantawi, who ruled Egypt for more than a year after the revolution that toppled former president Hosni Mubarak, was replaced by Abdel Fattah Al Sissi.

The veteran army leader had served as Mubarak's defence minister for two decades and headed the country after the strongman's overthrow, until he handed power to Mursi on June 30.

Armed forces chief of staff Sami Anan was also retired, state television said, a week after a deadly attack on the Egyptian military in the Sinai prompted an unprecedented military campaign in the lawless peninsula.

Both were awarded the Greatest Nile Collar, Egypt's most prestigious award, and retained as presidential advisors.

Mursi decided to scrap a key constitutional document which gave the military legislative powers and other prerogatives, his spokesman Yasser Ali said.

He amended the interim constitution to deny the military any role in public policy-making, the budget and legislation, and the right to pick a constituent assembly drafting a permanent constitution for post-Mubarak Egypt.

"The president has decided to annul the constitutional declaration adopted on June 17" by the Supreme Council of the Armed Forces, headed by Tantawi, Ali said.

"Given the circumstances, this is the right time to make changes in the military institution," said Murad Ali, a senior official with the Muslim Brotherhood's Freedom and Justice Party which fielded Mursi in a May-June presidential election.

"He is a strong president, and he is exercising his authority," Ali said of the surprise decision that tested the balance of power between the first civilian president in Egypt's history and the army.

Mursi, an Islamist who rose through the ranks of the Brotherhood before his election triumph, also decided to appoint a vice president.

He appointed judge Mahmoud Mekki as his deputy, the official news agency Mena reported, making him only the second vice president to be named in Egypt in 30 years.

Mubarak, who was ousted in February 2011, named his spy chief Omar Sulaiman as vice president just days before being forced to step down, after having resisted for three decades from naming a likely successor.

Sunday's moves were the latest in a series of major decisions taken by Mursi since the deadly attack on troops in the Sinai peninsula on August 5.

Last Wednesday, the president ordered spy chief Muraf Muwafi to retire in a reshuffle of military and intelligence ranks after the attack which killed 16 soldiers near Egypt's borders with Israel and the Gaza Strip.

And he also sacked the governor of North Sinai, Abdul Wahab Mabruk.

And the head of military police, Hamdi Badeen, was replaced because he was deemed to have failed to secure the funeral for the slain soldiers, during which some protesters tried to assault Prime Minister Hesham Qandil.

Islamists scored a crushing victory in Egyptian parliamentary elections that were held in three-stages from November last year, with the Muslim Brotherhood dominating the lower house.

But the military dissolved parliament in May after the Supreme Constitutional Court ruled that certain articles in the law governing the parliamentary polls were invalid, annuling the Islamist-led house, a decision rejected by Mursi.